The personal blog of Reyn Bowman, a Durham NC resident, 40-year veteran of community-destination marketing and still an explorer in community sense-of-place. Opinions expressed here are those of the author.

Wednesday, November 28, 2012

A Solution for Tourism’s Achilles’ Heel

Second only to dining, retail shopping is the second largest beneficiary of tourism spending. Unless drawn to destinations distinctive for place-based assets such as small independent retailers, for many trapped in the geography of nowhere tourism is only a form of generic shopping.

But when it comes to industries across the tourism sector of the economy, retail shopping is emblematic of an even more serious Achilles' heel, in my opinion.

Results from a remarkable surge in shopping during this past Thanksgiving weekend are heartening for continued economic recovery, but they also illustrate that as more and more daily shopping shifts online, tourism will become even more essential to store-front retail.

Of more significance to anyone taking a long-view at retail or any of the other five or six industries that comprise the tourism sector of the economy is a study by economist Dr. Catherine Ruetschin that was published earlier that same week by Dēmos.

Many jobs in tourism, including retail, don’t fall into the stereotype of low wage but far too many do. Those leading the tourism sector, which is fueled by community-destination marketing, are plagued by the majority who still refuse to pay a “livable wage,” none more so than those in retail.

Even more than from lack of enlightenment, the tourism sector’s relationship to “livable wage” is plagued by the condition sociologists and economists compared in 20th-century observations about the resistance of hockey players to wearing helmets. Even though nearly everyone acknowledged they were needed, fearing some unidentified disadvantage, few would use them until they were made mandatory for everyone.

In her study, Dr. Ruetschin notes that as of 2011, retail generated $4 trillion in annual revenue, comprising 6 percent of US Gross Domestic Product, employing 15 million people. But according to the Bureau of Economic Statistics the typical retail sales person earns just $21,000 per year with cashiers bringing home an average of $18,500.

Even before being adjusted for inflation, this is less than I made nearly 40 years ago as a start-up community-destination marketing executive. Meanwhile, the nation’s leading retailers, according to the analysis, earned $35 billion in profits during just the first half of 2012 and paid out $12.8 million in dividends, financed in large part by increased workloads and forfeited wages.

Ruetschin’s analysis and recommendations focus on the 42% of all workers primarily employed by large retailers (1,000 or more workers) in year-round positions. She illustrates that for these giants paying low wages is a choice not a necessity, and that it is bad for business, the economy and society.

The study estimates that establishing a wage floor of $25,000 a year ($12.25 per hour) at large retailers would generate between $12 million and $15 million in new consumer spending and would result in 102,000 to 132,000 new jobs.

Directly impacting 3.5 million workers and their families which totals 5 million overall, this would take less than 1% of overall sales, much of which would be offset by the job creation and new consumer spending as well as increased productivity. The change could be weighted at the lower end of the scale and tapered upward so as to not impact other ranges.

It could be done with less than an average of 15 cent increase per consumer per shopping trip while lifting millions of the working poor out of poverty.

Retail’s Hidden Potentialis a must read for everyone in the tourism sector. It leaves unresolved only that pesky condition found among hockey players: how to execute a win-win-win change without making it mandatory.

Maybe those in the tourism sector who are willing to spearhead the change can learn from the arbitrary move made 100 years ago by another tourism pioneer: Henry Ford, raised wages in 1914 in already-high-wage Detroit. The $5 per day was part base pay and part results-behavior-based incentive and Ford knew he would make up the difference in reduced turn-over and productivity.

It didn’t hurt that their new daily wage and increased productivity made it possible for employees to buy the Model T cars and trucks they were building for Ford along newly-industrial-scaled assembly lines with standardized parts which in turn had been made possible with increased company profits.